Accounting and Finance: Test 1 - Question Bank

Question Bank ''Accounting and Finance: Test 1'' with interactive revision questions on a variety of business topics.

Question Bank - Business Studies

Accounting and Finance: Test 1

Q1. A company buys and sells CD and DVD players. In a month it bought 200 DVD machines at a price of £80 each and sold 140 at a price of £150 each. 50% of its purchases and 75% of its sales were on credit. These were the only transactions for the firm for the month. What effect did this have on the level of debtors that the business had?

(Select one answer)

(a)
+ £8,000

(b)
+ £15,750

(c)
- £15,750

(d)
- £8,000

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Q2. A firm budgeted it use and costs of a raw material in a particular department at 50 tonnes per month at a price of £1,000 per tonne. In the even, the actual cost and usage was £980 per tonne and 51 tonnes. The accountants calculated and reported the material variance as

(Select one answer)

(a)
- £20 Favourable

(b)
- £20 Unfavourable

(c)
+ £20 Favourable

(d)
+ £20 Unfavourable

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Q3. A firm had budgeted its sales at 10,000 per month at a price of £50 per unit. The actual performance was sale of 9,000 at an average price of £52.40 per unit. The accountants calculated a reported a sales revenue variance of

(Select one answer)

(a)
- £28,400 Favourable

(b)
+ £28,400 Unfavourable

(c)
+ £28,400 Favourable

(d)
- £28,400 Unfavourable

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Q4. A firm knows that it sells a product with a price elasticity of demand of (-) 0.75. At present it sells 20,000 units each week at a price of £2.50 per unit. What will happen to the firms revenue per week if it raises its prices by 20%?

(Select one answer)

(a)
Increase by £1,000

(b)
Increase by £100

(c)
Decrease by £100

(d)
Decrease by £1,000

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Q5. A budget is

(Select one answer)

(a)
a statement showing how much must be spent in a period of time.

(b)
a plan, in financial terms, of a companies expenditure for a period of time in the future.

(c)
A plan, in financial terms, of a companies revenues and expenditures for a period of time ahead.

(d)
a statement, in financial terms, showing how much was received and spent last year.

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Q6. A company plans to sell 1,000 units of its product each month at a price of £200 per month. It actually only manages to sell 950 units in the first month. It has a revenue variance for that month of

(Select one answer)

(a)
+ £10,000 Unfavourable

(b)
+ £10,000 Favourable

(c)
- £10,000 Favourable

(d)
- £10,000 Unfavourable

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Q7. A firm sells its product for £100 each. In a particular month it sold 10,000 units. It then increased its price to £105 and sales fell to 9,000 units per month. The sales revenue that the firm earned changed by

(Select one answer)

(a)
+ £945,000

(b)
- £945,000

(c)
- £55,000

(d)
+ £55,000

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Q8. A firm sells its product for £100 each. In a particular month it sold 10,000 units. It then increased its price to £105 and sales fell to 9,000 units per month. The price elasticity of demand for the product is

(Select one answer)

(a)
- 0.5

(b)
+ 0.5

(c)
+ 2

(d)
- 2

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Q9. A company buys and sells CD and DVD players. In a month it bought 200 DVD machines at a price of £80 each and sold 140 at a price of £150 each. 50% of its purchases and 75% of its sales were on credit. These were the only transactions for the firm for the month. How much profit / loss did the firm make?

(Select one answer)

(a)
Loss of £5,000

(b)
£9,800

(c)
Loss of £5,000

(d)
£5,000

Source:

Q10. A company buys and sells CD and DVD players. In a month it bought 200 DVD machines at a price of £80 each and sold 140 at a price of £150 each. 50% of its purchases and 75% of its sales were on credit. These were the only transactions for the firm for the month. What effect did this have in the cash position of the business?

(Select one answer)

(a)
+ £5,000

(b)
- £5,000

(c)
+ £2,750

(d)
- £2,750

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Q11. All of the following are fixed assets except

(Select one answer)

(a)
buildings.

(b)
stock.

(c)
production plant.

(d)
vehicles.

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Q12. The following are examples of variable costs except

(Select one answer)

(a)
raw materials.

(b)
directors salaries.

(c)
packing materials.

(d)
commission payments.

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Q13. A company has sold a product for many years. Last year, it sold 120,000 units at a price of £25 per unit. This year it increased sales to 135,000, having left its price unchanged. The real income of the buyers had increased by 5%, however. It follows from the above that the product is

(Select one answer)

(a)
a normal good with an income elasticity of + 2.5

(b)
a normal good with an income elasticity of + 0.4

(c)
an inferior good with an income elasticity of + 0.4

(d)
an inferior good with an income elasticity of + 2.5

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Q14. A company buys and sells CD and DVD players. In a month it bought 200 DVD machines at a price of £80 each and sold 140 at a price of £150 each. 50% of its purchases and 75% of its sales were on credit. These were the only transactions for the firm for the month. What effect did this have on the level of creditors that the business had?

(Select one answer)

(a)
- £16,000

(b)
- £8,000

(c)
+ £8,000

(d)
+ £16,000

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Q15. One difference between an ordinary share and a preference share is that

(Select one answer)

(a)
dividends on ordinary shares have to be paid.

(b)
ordinary shares are a loan and have to be repaid on demand.

(c)
The ordinary share gives the owner the right to one vote at an AGM.

(d)
In the event of a firm going into liquidation, ordinary shares are paid back first.

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